Connect 2-Semester Access Card for Fundamental Accounting Principles
Connect 2-Semester Access Card for Fundamental Accounting Principles
22nd Edition
ISBN: 9780077632755
Author: John Wild
Publisher: McGraw-Hill Education
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Chapter 3, Problem 2GLP
To determine

Adjusting Entries:

The journal entries framed to realize the revenues and expense for the specified accounting period are called adjusting entries.

Income Statement:

The statement which shows the revenues earned and expenses incurred during a particular year is called Income statement.

Statement of Owner’s Equity:

The statement which shows changes in the owners’ equity due to net income or loss and owners’ withdrawal during the accounting period is called statement of owner’s equity.

Balance Sheet:

A financial statement which shows the financial position of a company during specified accounting period is called a balance sheet.

To determine:

Prepare adjusting entries, adjusted trial balance, and financial statements based on the given assignment.

Expert Solution & Answer
Check Mark

Answer to Problem 2GLP

Solution:

Date Accounts Debit Credit
Dec. 31 a. Insurance Expense $2,400  
  Prepaid Insurance   $2,400
       
Dec. 31 b. Teaching Supplies Expense $5,200  
  Teaching Supplies   $5,200
       
Dec. 31 c. Depreciation Expense – Equipment $13,200  
  Accumulated Depreciation – Equipment   $13,200
       
Dec. 31 d. Depreciation Expense – Professional Library $7,200  
  Accumulated Depreciation –
Professional Library
  $7,200
       
Dec. 31 e. Unearned Training Fees $5,000  
  Training Fees Earned   $5,000
       
Dec. 31 f. Accounts Receivable $7,500  
  Tuition Fees Earned   $7,500
       
Dec. 31 g. Salaries Expense $400  
  Salaries Payable   $400
       
Dec. 31 h. Rent Expense $3,000  
  Prepaid Rent   $3,000
       

Financial Statements

WELLS TECHNICAL INSTITUTE
Income Statement
December 31, 2017
Revenues:    
Tuition Fees Earned $131,400  
Training Fees Earned $45,000  
Total Revenue   $176,400
     
Expenses:    
Salaries Expense $50,400  
Insurance Expense $2,400  
Rent Expense $36,000  
Teaching Supplies Expense $5,200  
Advertising Expense $6,000  
Utilities Expense $6,400  
Depreciation Expense – Professional Library $7,200  
Depreciation Expense – Equipment $13,200  
Total Expense   $126,800
     
Net Income   $49,600
WELLS TECHNICAL INSTITUTE
Statement of Owner’s Equity
December 31, 2017
T. Wells, Unadjusted Balance $90,000
Net income for the month $49,600
Subtotal $139,600
Owner’s withdrawal (50,000)
T. Wells, Adjusted Balance $89,600
WELLS TECHNICAL INSTITUTE
Balance Sheet
December 31, 2017
Assets    
Current Asset:    
Cash $34,000  
Accounts Receivable $7,500  
Teaching Supplies $2,800  
Prepaid Insurance $9,600  
Prepaid Rent $0  
Total Current Assets   $53,900
     
Plant, Property and Equipment    
Professional Library $35,000  
Accumulated Depreciation – Professional Library $17,200 $17,800
Equipment $80,000  
Accumulated Depreciation – Equipment $28,200 $51,800
Total Plant, Property and Equipment   $69,600
     
Total Assets   $123,500
     
Liabilities    
Current Liabilities    
Accounts Payable $26,000  
Salaries Payable $400  
Unearned Training Fees $7,500  
Total Liabilities   $33,900
     
Owner’s Equity    
T. Wells, Capital   $89,600
     
Total Liabilities and Owner’s Equity   $123,500
     
Adjustment Impact on net income
a. The expiration of insurance coverage is insurance expense incurred which will decrease the net income for the period.
b. Teaching supplies expense is an expense which reduces the net income of the company.
c. Annual Depreciation on equipment will reduce the value of the equipment and decrease the net income by the same amount.
d. Depreciation expense on professional library is an expense which decreases the net income.
e. The training fees earned decreases the balance of Unearned Training Fees and increase the revenue of the company and consequently increases the net income for the period.
f. Accrued Tuition fees increases the accounts receivable balance and net income of the company.
g. Accrued salaries expense decreases the net income and increases the liability “ Salaries Payable”.
h. The rent expense debited by crediting the prepaid rent increases the expenses of the company and at the same time decreases the net income for the period.
   

Explanation of Solution

Explanation:

Cash
Unadj. Bal. $34,000    
       
Accounts Receivable
Unadj. Bal. $0    
f. $7,500    
Bal. $7,500    
Teaching Supplies
Unadj. Bal. $8,000 b. $5,200
Bal. $2,800    
Prepaid Insurance
Unadj. Bal. $12,000 a. $2,400
Bal. $9,600    
Prepaid Rent
Unadj. Bal. $3,000 h. $3,000
Bal. $0    
Professional Library
Bal. $35,000    
       
Accumulated Depreciation – Professional
Library
    Unadj. Bal. $10,000
    d. $7,200
    Bal. $17,200
Equipment
Bal. $80,000    
       
Accumulated Depreciation – Equipment
    Unadj. Bal. $15,000
    c. $13,200
    Bal. $28,200
Accounts Payable
    Bal. $26,000
       
Salaries Payable
    Unadjusted Bal. $0
    g. $400
    Bal. $400
Unearned Training Fees
e. $5,000 Unadj. Bal. $12,500
    Bal. $7,500
T. Wells, Capital
    Bal. $90,000
       
T. Wells, Withdrawals
    Bal. $50,000
       
Tuition Fees Earned
    Unadj. Bal. $123,900
    f. $7,500
    Bal. $131,400
Training Fees Earned
    Unadj. Bal. $40,000
    e. $5,000
    Bal. $45,000
Depreciation Expense – Professional Library
Unadjusted Bal. $0    
d. $7,200    
Bal. $7,200    
Depreciation Expense – Equipment
Unadjusted Bal. $0    
c. $13,200    
Bal. $13,200    
Salaries Expense
Unadj. Bal. $50,000    
g. $400    
Bal. $50,400    
Insurance Expense
Unadjusted Bal. $0    
a. $2,400    
Bal. $2,400    
Rent Expense
Unadj. Bal. $33,000    
h. $3,000    
Bal. $36,000    
Teaching Supplies Expense
Unadjusted Bal. $0    
b. $5,200    
Bal. $5,200    
Advertising Expense
Bal. $6,000    
       
Utilities Expense
Bal. $6,400    
       
WELLS TECHNICAL INSTITUTE
Adjusted Trial Balance
December 31, 2017
     
Cash $34,000  
Accounts Receivable $7,500  
Teaching Supplies $2,800  
Prepaid Insurance $9,600  
Prepaid Rent $0  
Professional Library $35,000  
Accumulated Depreciation – Professional Library   $17,200
Equipment $80,000  
Accumulated Depreciation – Equipment   $28,200
Accounts Payable   $26,000
Salaries Payable   $400
Unearned Training Fees   $7,500
T. Wells, Capital   $90,000
T. Wells, Withdrawals $50,000  
Tuition Fees Earned   $131,400
Training Fees Earned   $45,000
Depreciation Expense – Professional Library $7,200  
Depreciation Expense – Equipment $13,200  
Salaries Expense $50,400  
Insurance Expense $2,400  
Rent Expense $36,000  
Teaching Supplies Expense $5,200  
Advertising Expense $6,000  
Utilities Expense $6,400  
     
Totals $345,700 $345,700
     
Conclusion

Conclusion:

Wells Technical Institute’s net income for the year ended December 31, 2017 is $49,600 and the total assets, liabilities and owners’ equity is $123,500.

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Connect 2-Semester Access Card for Fundamental Accounting Principles

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